Patna HC Quashes BSFC Blacklisting Order Issued on a Clause That Was Never Part of the Original Tender

The Patna High Court set aside a three-year blacklisting of a food-grain transporting agent by BSFC, finding the punitive action rested on a tender clause that did not exist in the original NIT.

A Division Bench of the Patna High Court, comprising Justice Sudhir Singh and Justice Shailendra Singh, has quashed two orders issued by the Bihar State Food and Civil Supply Corporation (BSFC) that cancelled the transport agreement of Sanjay Kumar Jaiswal, forfeited his security deposit and bank guarantee, and blacklisted him for three years. The bench found that the entire punitive action was founded on Clause 9(iii)(d) of the Notice Inviting Tender (NIT) dated 05.02.2016 — a clause the respondents could not demonstrate ever formed part of that original tender document. The court directed BSFC to return the forfeited security amount and bank guarantee within a reasonable period of receiving a copy of the order.

The Dispute Before the Court

BSFC issued a tender notice on 05.02.2016 inviting applications for appointment of Transporting and Handling Agents for doorstep delivery of food grains across various districts of Bihar, including Kaimur. Jaiswal, a resident of Bhabhua in Kaimur district, participated in the tender process and submitted the requisite documents and affidavits.

The District Transport Committee, Kaimur, scrutinised his application and found him eligible. His name was recommended to the Head Office. The Head Office Transporting Committee also declared him eligible, and on 16.07.2016 the District Manager, Kaimur was directed to appoint him as Transporting Agent up to 31.03.2019. An agreement was executed and Jaiswal commenced work.

After approximately one year of service, a show cause notice dated 10.10.2017 was issued against him alleging submission of a false affidavit and violation of Clause 9(iii)(d) of the tender conditions. Jaiswal replied, denying the allegations. The Managing Director of BSFC then passed Memo No. 13056 dated 23.12.2017, and pursuant to it, the District Manager issued Memo No. 2259 dated 29.12.2017. These two orders cancelled the agreement, forfeited the security deposit and bank guarantee, and blacklisted Jaiswal for three years.

Jaiswal challenged both memos before the High Court in Civil Writ Jurisdiction Case No. 1630 of 2018, seeking their quashing and his re-engagement as transporting agent for Kaimur district.

The Shifting Basis of the Allegation

Before the bench, counsel for Jaiswal, Mr. Amrendra Narayan Rai, made a pointed submission: Clause 9(iii)(d), cited in the show cause notice, did not form part of the original NIT dated 05.02.2016. He argued that the petitioner had been duly selected after verification by competent authorities and had been discharging his duties without any allegation of misappropriation.

Counsel also drew attention to an internal inconsistency in BSFC's own conduct. The show cause notice referred to Clause 9(iii)(d), but the final impugned order of 29.12.2017 shifted the basis to Clause 9.6 of the NIT. This change of ground between the show cause stage and the final order, counsel submitted, itself demonstrated that the action was not anchored in the original tender conditions.

On the merits of the allegation, counsel submitted that Jaiswal was neither a fair price shop licence holder nor the owner of any rice mill, and therefore there was no suppression of facts. The impugned action was characterised as arbitrary, mala fide, and violative of Articles 14 and 19(1)(g) of the Constitution.

BSFC's counsel, Mr. Shailendra Kumar Singh, defended the action. He submitted that the petitioner had executed an agreement in the name of his wife, Madhu Devi, for milling of paddy in 2013–14, and that public food grains amounting to Rs. 2,01,72,768.32 including interest had been defalcated. Under Clause 9.6 of the NIT, he argued, the petitioner was ineligible for selection and had submitted a false affidavit at the time of bidding.

The Legal Issue the Bench Framed

The bench distilled the controversy into a single question: whether an employer can pass an order of cancellation, forfeiture, and blacklisting by going beyond the terms and conditions of the tender notice.

The court noted the admitted position: the tender was issued on 05.02.2016, Jaiswal participated, was found eligible by both the District Transport Committee and the Head Office Committee, was appointed, executed an agreement, and continued to discharge his work. The punitive action was primarily founded on the allegation that he violated Clause 9(iii)(d) and submitted a false affidavit.

The bench observed that Jaiswal had specifically asserted that no such Clause 9(iii)(d) formed part of the original NIT dated 05.02.2016. Despite opportunity, the respondents failed to bring on record any material to demonstrate that Clause 9(iii)(d) actually formed part of the original tender conditions. The court further noted that while passing the final order of 29.12.2017, the respondents themselves shifted the basis from Clause 9(iii)(d) to Clause 9.6. This inconsistency, the bench held, strengthened the petitioner's case that the impugned action was not founded upon the original terms and conditions of the tender notice.

How the Bench Reasoned

The bench set out the settled principle that in matters of public tender, the State and its instrumentalities are bound to act strictly in accordance with the terms and conditions stipulated in the NIT and cannot deviate from them in an arbitrary or selective manner. Any relaxation or departure from prescribed eligibility conditions, unless expressly permitted in the tender document itself, would be violative of Article 14.

The court relied on three Supreme Court decisions. In Ramana Dayaram Shetty v. International Airport Authority of India, (1979) 3 SCC 489, the Supreme Court held that the State is rigorously bound by the standards it prescribes and cannot act arbitrarily in the matter of public contracts. The court quoted the observation that “an executive authority must be rigorously held to the standards by which it professes its actions to be judged.” The Supreme Court had also held in that case that an order of blacklisting deprives a person of equality of opportunity in the matter of public contracts, engaging Article 14 directly.

In Harminder Singh Arora v. Union of India, (1986) 3 SCC 247, the Supreme Court held that the State and its instrumentalities are bound by the terms and conditions of the tender notice and cannot act beyond or contrary to the conditions stipulated therein while dealing with bidders.

The bench also drew on the recent decision in Maha Mineral Mining & Benefication Pvt. Ltd. v. Madhya Pradesh Power Generating Co. Ltd., (2025) SCC OnLine SC 1942, where the Supreme Court observed that “conditions in a NIT must be clear and unambiguous” and that a bidder cannot be disqualified on the basis of a condition not expressly stated in the tender document.

The underlying rationale, the bench explained, is that every participant in a tender process is entitled to know with certainty the exact conditions governing the tender. Any deviation renders the process arbitrary and violative of Article 14.

Applying these principles, the court found that the respondents had failed to establish that the condition forming the very basis of the show cause notice and subsequent punitive action was part of the original tender conditions of 05.02.2016. Once Jaiswal had been declared eligible by the competent authorities and the agreement had been executed, BSFC could not subsequently resort to cancellation, forfeiture, and blacklisting on the basis of a condition not forming part of the original tender document. The impugned action was held to suffer from arbitrariness and to be unsustainable in law.

Order

The Division Bench allowed the writ petition. Memo No. 2259 dated 29.12.2017 and Memo No. 13056 dated 23.12.2017 were set aside. The court directed that the security amount and bank guarantee forfeited pursuant to those orders be returned and released in favour of Jaiswal within a reasonable period from the date of receipt or production of a copy of the order. All pending applications were disposed of.